By Christopher M. Matthews 

Exxon Mobil Corp. posted its third consecutive quarterly loss for the first time on record Friday and disclosed that it may write down the value of natural-gas assets worth as much as $30 billion, as the coronavirus pandemic continues to pressure the world's biggest oil companies.

The Texas oil giant reported a loss of $680 million in the third quarter compared with a profit of $3.17 billion during the same period last year.

Exxon Chief Executive Darren Woods invested heavily before the pandemic to grow Exxon's oil and gas production by 2025. That decision has backfired as commodity prices plunged this year, forcing the company to make substantial cuts and painful choices about where to invest.

"We are on pace to achieve our 2020 cost-reduction targets and are progressing additional savings next year as we manage through this unprecedented down cycle," Mr. Woods said.

Rival Chevron Corp. on Friday posted a third-quarter loss of $207 million compared with a profit of $2.58 billion in the same quarter last year. Royal Dutch Shell PLC reported a profit of $546 million Thursday, while BP PLC lost $307 million.

The results make clear that the pandemic continues to weigh on the industry despite a modest economic recovery and rebound in demand for oil and gas. New lockdowns in Europe are conjuring fears that rapidly climbing virus cases could mean a prolonged global recession.

"I think the industry would say this is their nightmare scenario," said Regina Mayor, who leads KPMG's energy practice.

On Thursday, Exxon said it could cut as much as 15% of its global workforce, or about 14,000 jobs, as the struggling oil company tries to cut costs and survive the Covid-19 downturn. In all, big oil producers and services firms are collectively shedding more than 50,000 jobs.

"The world's economy continues to operate below pre-pandemic levels, impacting demand for our products which are closely linked to economic activity," Chevron CEO Michael Wirth said Friday.

Lower oil and gas prices brought on by the pandemic and uncertainty over the pace of the transition to lower-carbon energy have caused major oil companies to question the value of their assets.

Exxon had stood out among its peers this year for resisting large write-downs. Its disclosure Friday that it could take a huge one comes after months of pressure from analysts and others who argued it needed to do so.

Shell said earlier this year it would write down the value of its assets by up to $22 billion because of lower energy prices and BP is writing down as much as $17.5 billion. Last year, Chevron said it would cut the value of its assets by $10 billion.

Exxon Senior Vice President Andrew Swiger said on an investor call Friday that it is strategically evaluating which assets are worth investing in under current market constraints and could move to sell some its North American dry gas assets with a carrying value of $25 to $30 billion, potentially resulting in an impairment.

Spokesman Casey Norton said Friday that the impairment hadn't been completed and would be considered by the board later this year. Mr. Norton said the impairment doesn't indicate changes to Exxon's long-term price views and isn't a reaction to short-term price fluctuations.

If Exxon were to write down close to the full value of those assets, it would be among the largest-ever charges taken by an oil-and-gas company, according to analysts.

The company also said it would reduce its capital expenditures to between $16 billion and $19 billion next year. Exxon had planned to spend $33 billion in 2020, but cut its capital expenditures to $23 billion after the pandemic took hold.

Paul Sankey, an analyst who has long called for Exxon to write down the value of its shale gas assets, said the impairment was overdue.

"It never made sense that there wasn't the mother of all write-downs," said Mr. Sankey, the lead analyst at Sankey Research.

As The Wall Street Journal previously reported, several oil and gas accounting experts have alleged that Exxon's reticence to adjust the value of assets on its balance sheet amounts to accounting fraud in a series of complaints filed to U.S. authorities. By their estimates, Exxon should have taken a $44 billion impairment loss this year and a corresponding $56 billion reduction of its reported assets on its balance sheet in the second quarter.

The group, which filed a whistleblower complaint with the Securities and Exchange Commission, has singled out Exxon's acquisition of XTO Energy Inc., a natural-gas driller it purchased for $31 billion a decade ago, along with other assets.

Exxon has rebutted the criticism of its write-down practices, saying that the company is in compliance with accounting rules and SEC regulations about disclosures to investors.

Exxon has said it is able to avoid write-downs because it is extremely conservative in initially booking the value of new fields and wells and doesn't respond to short-term commodity-price fluctuations. Before 2016, Exxon had never recognized an asset impairment under U.S. accounting rules implemented in the 1990s.

Despite the capital constraints imposed by the pandemic, Mr. Swiger said Friday Exxon would continue to maintain its hefty dividend, and that its long-term plan to grow production is unchanged because energy demand will ultimately grow.

"While questions remain around future demand recovery, one thing is certain," Mr. Swiger said. "Current conditions cannot continue, supply and demand will eventually meet."

Exxon's production increased to 3.7 million barrels a day, up 1% from the second quarter but down nearly 6% from the same period last year. Exxon's oil and gas production unit posted a $383 million loss in the third quarter, while its downstream and refining business lost $231 million in the quarter.

Chevron's production unit eked out a profit of $235 million, producing 2.83 million barrels a day in the third quarter, down 7% from a year ago. Its downstream earnings fell to $292 million from $828 million.

Chevron Chief Financial Officer Pierre Breber said on a call with analysts Chevron would continue to cut costs next year and expects to spend around $10 billion in capital expenditures in 2021.

"We're in an economy that's impacted by pandemic, and demand for our products is below normal levels in pre-pandemic levels," Mr. Breber said. "We are trying to sustain the long-term value of the enterprise."

Dave Sebastian contributed to this article.

Write to Christopher M. Matthews at christopher.matthews@wsj.com

 

(END) Dow Jones Newswires

October 30, 2020 13:33 ET (17:33 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
Chevron (NYSE:CVX)
Historical Stock Chart
From Nov 2020 to Dec 2020 Click Here for more Chevron Charts.
Chevron (NYSE:CVX)
Historical Stock Chart
From Dec 2019 to Dec 2020 Click Here for more Chevron Charts.